But it’s by no means a comprehensive agreement.
Last week came some surprising news: The Trump administration had reached a trade agreement with China! U.S. Commerce Secretary Howard Lutnick announced it on a live TV interview that a deal had been signed a few days earlier, but he was scant on details.
In the following days the deal was confirmed; on Thursday President Trump said it had been signed “the other day,” and then U.S. Treasury Secretary Scott Bessent added more particulars on Friday, explaining that China had agreed to make the rare earth minerals – the supply of which it dominates and has been restricting – easier to acquire for American firms. In exchange the U.S., according to a Chinese Commerce Ministry statement, “will lift a series of restrictive measures it had imposed on China.” That probably means export controls on certain U.S. technologies, but who knows?
This relatively muted announcement is hardly the kind of response you would expect from the Trump administration (or any U.S. administration) had it reached a major deal with Chinese leadership over all the issues affecting bilateral trade between the two countries. So suffice it to say: This agreement is not comprehensive and is chiefly about access to rare earths.
That’s not nothing. As the Wall Street Journal pointed out in its coverage, “significant progress on the issue of rare earths would likely pave the way for deeper economic negotiations between the U.S. and China, after they had agreed in May to temporarily lower tit-for-tat tariffs imposed on each other.”
But it shouldn’t exactly be celebrated either. The fact that China has been consolidating its hold over rare earths has been known for over a decade now (the Alliance for American Manufacturing (AAM) identified it as a significant industrial chokepoint that Beijing would leverage in a 2013 report).
What’s more, the rest of the issues affected U.S.-China trade are very important. The Chinese government encourages and supports all kinds of non-market behavior. And whether its intellectual property theft, circumvention or subsidies, the fundamentals of its industrial strategy are unlikely to change. That’s why the United States must not make a deal of convenience here. It should not cut a commodity purchasing agreement like it did during the first Trump administration, the terms of which China didn’t fulfill anyway; it should be working to make the tariffs it’s raised more effective while providing domestic manufacturers the certainty they need to make more investments. The goal of this whole exercise should be to separate from China’s manufacturing sector.
AAM President put it thusly in a Detroit News opinion last month:
This entire effort is premised on reshoring manufacturing capacity, but it won’t grow when the United States is awash with dominant Chinese import competition, nor will it if tariff measures are fleeting.
You can read more about rare earths agreement reached with China here.